Forecast: Homebuilders to focus on Calif. cities

LOS ANGELES 
Many of the homebuilding jobs lost during the California's economic downturn won't be coming back to help fuel its recovery, according to an economic study released Wednesday.

The quarterly Anderson Forecast from the University of California, Los Angeles, said there would likely be no major rebound in single-family home construction due to the growing dominance of a younger population that prefers urban-style apartment and condo living.

"What we've seen is this shift toward multifamily housing demand," said the forecast's author, Jerry Nickelsburg. "You can see that in the demographics."

Since apartment units require far fewer workers than single-family homes, the post-recovery homebuilding sector will employ fewer people than before the downturn, Nickelsburg said.

Those jobs will be missed most acutely in the state's inland regions. In those areas, far from the urban coastal areas where most new residential demand is expected, single-family home construction had been a chief source of employment before the housing bust.

The weakness of the state's housing sector will contribute to the slow pace of economic growth expected for the rest of the year, the report said.

Employment was forecast to grow at a rate of 1.7 percent through 2011, keeping joblessness no lower than 11.7 percent. The state was unlikely to generate enough jobs to tug unemployment down to the single digits until the second quarter of 2013.

The state's most recent tally put unemployment at 11.9 percent in April, down from a modern record of 12.6 percent reached in March 2010. The national rate is 9.1 percent.

Real personal income was forecast to grow at 1.7 percent in 2011, 3.3 percent in 2012 and 3.8 percent in 2013.

Growth will be driven by such sectors as education, health care, exports and technology, all of which are concentrated along the state's coast.

Inland California, however, will see years of slower growth as it adjusts to a residential construction industry that's bound to stay small for the foreseeable future, the report said.

The report noted that building permits for single-family and multi-family dwellings had both fallen to about 20 percent their 2006 peaks in mid-2009. But multi-family permits have since recovered to about 40 percent of their peak level, while single-family permits continue to decline, the report said.

The forecast speculated that this trend was likely to continue, as the so-called Generation Y - people now between their pre-teens and early-30s - becomes the state's majority.

That generation will rapidly become the state's biggest home-hunters, but it is not at the age to demand single family detached housing. The report notes that when the large Baby Boom generation was of a similar age in 1983, a year when the economy was coming out of another deep recession, demand for apartments and condos drove developers to build more multi-family housing.

The report also speculated that members of the older, smaller Generation X - those now in their later 30s or 40s - bore the brunt of the housing downturn and may be unable or unwilling to try home ownership a second time.

"So it is reasonable to assert that as the economy improves and there is increased demand for housing, there is not going to be a big push from Gen Xers for new single-family housing located in inland California," the report said.

Harvard economics professor Edward Glaeser, author of "Triumph of the City," cautioned that California's regulatory environment might make it difficult for housing to rebound even in the urban areas where the future demand is projected to lie.

California's environmental review process has allowed neighborhood resistance to stymie residential construction in Los Angeles, San Francisco and other large cities, he said.

"California hobbles its overall economic growth by making it difficult to build in its more attractive productive parts of the state," said Glaeser, adding that the shift to urban, multifamily living would pay environmental dividends as well, since apartment and condo buildings eat up less space and city dwellers are more likely to commute by foot or public transit that suburbanites.

Michael Dieden, chairman of the California Infill Builders Association, meanwhile, said the urban-oriented developers who make up the group have not been able to build much in anticipation of this demand because financing has not been available for almost any type of new construction.

But he said the few urban apartment and condo projects that have opened in the state in recent years - most of them owned by banks that foreclosed on original developers - have attracted residents more easily than the single family homes that still languish in less densely populated parts of the state.

"What has happened is we've seen a collapse of the sprawl business," he said.

But social demographer Joel Kotkin said he wasn't ready to write off the suburbs. Inland California has seen the state's greatest population growth in recent decades because of the suburban lifestyle that it offers and he said he doesn't expect that trend to change.

"Most of the growth in California has been in places with single family homes. Doesn't that tell us something about what people want?" he said.

He also said there was no reason to assume that the highly mobile and largely unencumbered Generation Y would move to California's coastal cities when they could easily move out of the state altogether.